The Telcos Catch Up

telecommunications companies are very interested in marketing to small businesses.

But many telcos ignore vast amounts of data that they have in-house. And some have not yet made optimal use of compiled files containing basic business demographics.

“I’ve been a customer of AT&T since there was dirt, which means it has on file extraordinary amounts of information about me and my businesses, and they don’t need to spend a dime to find out about me,” points out Michael Brown, president of Austin, TX-based Business Marketing Consultancy, which specializes in business-to-business marketing by telephone. “But in my experience they don’t do it.”

Emphasizing that AT&T is no worse than any of the long-distance carriers in this regard, Brown describes a recent telephone sales call in which the rep was touting a money-saving long-distance service. “I said, `That would be wonderful, but when you analyzed my outbound and 800-number incoming calls, what did you discover about my service?’ The rep said, `I don’t know, we’re just introducing a new program.’ I said, `How dare you purport to save me money without knowing about my account?'”

New York-based Bell Atlantic Corp., on the other hand, has made a major push in the past three years to better target its 13,000 small-business customers.

While admitting that “if it’s a two- or three-line business, we don’t have the resources to reach them,” spokesman James Smith says the company looks to a compiler to provide number of employees and business type “so that we can put the businesses in tiers according to size. Then we segment vertically by business type.”

Small businesses, he points out, need to save money and time, and products such as cell phones, caller ID and customer-support software all help with that goal. But all products don’t work for all types. “For example,” Smith says, “you don’t want to push voice mail to a doctor’s complex, but it might work for a realtor’s office.”

Still, in pitching the vital small-business ideas of growing your business, boosting productivity and lowering costs, Bell Atlantic’s method is still “broad brush,” that is, sending direct mail “to stimulate interest and waiting for the small-business customer to call.”

As competition heats up, Smith acknowledges, that will have to change. “The small-business market is ripe for invaders as more companies come into the local market.”

So what are some of the more common mistakes made by telcos when using either in-house or compiled data?

One is that they sometimes purchase compiled data on how many PBX lines or how much long-distance service a company uses to help estimate how much potential business the telco could expect from a firm. “This can be very misleading because even a small company could have a lot of lines,” says Cyndi Greenglass, president of World Marketing Integrated Solutions, Burr Ridge, IL. “This data is not fine-tuned enough for targeting.”

Typically, telcos blend a file of their own customers with a compiled database of expanded, enhanced data of the entire universe, with information such as the size of the company, number of locations, whether they are domestic or international, and other pieces. Although this method works to help telcos predict usage across a large group of potential customers, it is less effective for small businesses. “The smaller the company, the less detailed data exists, and the harder it is to accurately estimate or model that location,” says Greenglass.

What would be more effective is to blend detailed information about what a company does – data it can get from a compiler – with its demand for telecom products. But since telcos don’t do that, they are missing out on a lot of potential revenue and volume, says Greenglass.

Sprint realized this. With AT&T seeking big business, Kansas City, MO-based Sprint devoted a king’s ransom in time and money to capture the small-to-midsize portion of the market. Today, the long-distance carrier has built what is considered the best B-to-B in-house database in the industry.

Equally as serious as potential competition is the churn rate among telecom customers. Beyond the type of business, telcos should find out whether a company is divesting, merging, growing or diversifying. Telcos should also identify potential consumer cross-sell opportunities.

“In this office, we have eight corporate cell phones and our telecom company knows there are eight phones, but they don’t even know who the primary users of those phones are,” says Warren Hunter, president of the Philadelphia office of direct marketing agency DMW Worldwide. One cross-selling tool available in the market is Orange, CA-based Experian’s Business Owner database that seeks to match business owner’s personal and credit data with data from their businesses.

Telcos must hold on to a customer for three years to turn a profit on that customer. But commodity pricing encourages tremendous churn. Traditionally, “telcos didn’t care what type of customer they acquired as long as they got a warm body – they wanted more customers than their competitor had. But if you acquire without a plan for a long-term sustainable retention strategy, then you will lose them before they’ve had a chance to become profitable to you,” Greenglass adds.

Customer service is the key to damming churn.

That’s why 15-year-old long-distance provider ATX Telecommunications focuses on bundling services and meeting vertical markets’ particular needs.

Once ATX acquires company size and type, it investigates what service would best serve that business. For example, for law firms, it pitches a proprietary billing software product to help track the detail of client account activity. For ad firms, ATX touts the use of multiple 800 numbers to track different promotions.

Small businesses are ATX’s central market, and “being consultative is our angle,” says Craig Moran, manager of major markets for the company based in Bala Cynyd, PA. “For every vertical market we are approaching, there are certain little hooks into that market.”

In addition, ATX offers Internet, cellular and paging services. “Peripherals are a tremendous retention tool,” Moran says. “Typically, other long-distance carriers compete with their long-distance rate. But the more peripheral services we have for our customers, the harder it is for our competition to take that business away.”